In the wake of the Federal Reserve?s decision not to taper and to leave interest rates unchanged, our long positions are soaring and our short positions are collapsing.
No surprise here, as both the Mad Hedge Fund Trader and the Mad Day Trader nailed the market?s reaction well in advance with a profusion of timely Trade Alerts over the last few days.
Treasury bonds have cratered, with the (TLT) down a full point. The short Treasury ETF (TBT) has gapped up nearly a point and a half. The S&P 500 (SPY) is down 1.5 points, while the Euro has given back nearly a penny against the US dollar.
Both our RISK ON/RISK OFF positions are working at the same time. As a result, we are seeing a surge upward in the performance of the Trade Alert Service model portfolio. More than half of the potential profit in all our existing positions can be realized on a mark to market basis.
If you want to book a day trade or an overnight profit here, go ahead and do so. You don?t get windfalls like this very often. Sit back and smell the roses.
As for myself, I am going to hang on a little longer. This makes it much easier for me to run the entire book into expiration, only 12 trading days away, which was the original plan.
To refresh your memory, here are our current positions below:
https://www.madhedgefundtrader.com/wp-content/uploads/2013/01/Market.jpg217237Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-31 09:07:022013-10-31 09:07:02Trade Alert on Risk Control
So much BS is flying about over the Obamacare issue that I can?t resist the temptation to put in my two cents worth.
There was no chance this was going to work on day one, and I warned senior administration officials as much on many different occasions. Even the Massachusetts health care plan only saw 100 sign ups in the first month, and it was supported by both parties.
The fatal flaw? They believed the website developer, which anyone who runs on online business, such as myself, will tell you, is a great way to ruin your life.
The truly shocking revelation is that the lead development contract was handed out to a Canadian company. Hey, we out here in Silicon Valley have web development companies! One wonders why the government didn?t hand the whole project over to Google.
While the administration has applauded the millions who rushed to sign up in the early days, I believe that the headline we will see in six months or a year is that almost of them were already sick and uninsured, with diabetes, hypertension, or even cancer. Why the rush?
The government is essentially attempting to create 50 Amazon?s overnight with the many state insurance exchanges. It took Amazon, itself, 20 years to create just one Amazon, and that?s with my old friend, the brilliant Jeff Bezos, calling the shots and taking huge risks.
Having worked with the US military for 40 years, I can tell you that the government never throws anything away, not old tanks, old fighters, old weapons, and yes, old software. I can?t tell you how many times I jumped into a Navy or Marine cockpit, looked at the instrument panel, and said to myself ?You?ve got to be kidding. This thing belongs in a museum.?
For example, the B-52 Stratofortress intercontinental bomber, which was first designed in 1946 and built in 1952, is not scheduled for retirement until 2050, when it will be nearly 100 years old. Thank goodness for preventative maintenance!
So it is no surprise then to hear that the root of Obamacare?s software problems lies with its inter platform communication. ?Some of the software is brand new, some is 10 years old, and some 20 years old, and custom written by programmers who are probably dead by now. But it all has to talk to each other to function. Good luck with that!
Health care accounts for 12% of our GDP, or about $2 trillion, and employs about 18 million people. That amount of money generates gargantuan fees for lobbyists to maintain the gravy train for the private companies who run the system. This is an industry that has been sheltered from competition until now, which is why costs have been running away for 30 years.
As a result, virtually all information about Obamacare disseminated by the media is inaccurate.? You see kids being interviewed on the street asked how much more they will have to spend on Obamacare compared to no coverage at all, and the figure comes to about $2,500 a year.
This is for kids who make $30,000-$40,000 a year. It is a big hit to be sure. But no one asks what will happen if they get hit by a car, or fall off their skateboards. That?s because there is only one answer: go to county hospital, and then file for bankruptcy. Still, most will end up paying the first year fine, which is $85.
This week?s talking point, manufactured by political consultants working in ill lit rooms for unknown companies funded by anonymous donors, is about the millions of cancellation letters that have been sent out by insurance companies individual alarmed private policyholders. I have read a few of these letters.
It turns out that the insured in question had bargain basement policies that really didn?t cover them for anything. They don?t find this out until they try to make a claim, which then gets denied. By setting new, higher standards to fit in the round holes of the public exchanges, the government is forcing the providers to raise the quality of care or quit the business, which they are doing in droves. Somehow, Obama was supposed to know they were going to do this when the law was written five years ago.
The policyholders don?t know this because they have never read their own policies, and are unaware of what the government plan offers. They are having to comparative shop for health care for the first time in their lives, and they don?t like it. Most just paid up for the annual price increases without question.
The alternative, of course, is to then go out and get an Obamacare policy, which offers more care at a cheaper price than these cancelled policies. Yes, it is true that polices in rural constituencies may cost more. But that?s as it should be. It always costs more to provide service in the middle of nowhere than it a city.
There has been a lot of hand wringing about the higher cost of Obamacare policies. Everyone I have talked to here in California is seeing a savings of about 50%. A part time schoolteacher friend of mine was just given notice that her Blue Cross policy was doubling from $200 to $400 a month. She then went to https://www.healthcare.gov and got a better, more comprehensive policy for $220 a month.
Finally, I have had no insurance for six years. I loyally paid $500 a month into Blue Cross for one of their high-end policies for 20 years. When I shifted coverage from one of my companies to another to get a tax benefit, I was told I had to file as a new applicant. What was my new rate? $3,500 a month. So I asked to restore my old coverage. Blue Cross said no, because I had pre existing conditions. What was my pre existing condition? I was then a 55-year-old white male.
So I called around to find out what my health care actually cost. A broken leg ran $50,000, while a heart attack was $250,000. But if I paid cash, they would cut the bill by half. So I told Blue Cross to get lost. My total health care costs have run about $500 a year since then, mostly for bandaging my sore feet from 50 miles a week of mountainous backpacking and an annual commercial pilot?s physical. I reckon that I am one heart attack ahead of the game by now.
Now Obamacare is requiring me to get health insurance once again. If I don?t sign up, the fine is 1% of my gross income in the first year, and 2.5% in the second. Oops! Don?t want to go there! I?d end up buying the government a new hospital every year. So I signed up for Obamacare. Their lowest level ?Bronze? plan will cost me $235 a month. That I can handle.
The Affordable Health Care Act will probably bring more positive changes to the US economy since the slaves were freed in 1863. As with Thomas Edison?s introduction of electricity, Steve Job?s personal computer, and Tim Berners-Lee?s World Wide Web, its impact will be so broad that it is impossible to predict the ultimate impact.
For sure, it will allow US companies to get out of the health care business once and for all, which has left them at a globally competitive disadvantage for decades. This is why Fortune 500 CEO?s have been conspicuously mum on the issue.
You can bet that the next time your firm has a bad quarter, they will cancel your Cadillac plan to cut costs, boost profits, give you the https://www.healthcare.gov website address, and say ?Good Luck? (click here to see if you can open it. You should).
In any case, the premiums on company provided plans costing more than $10,000 a year are now taxable as ordinary income. I know from my own experience that investment bank and oil major plans cost over $25,000. So goodbye to another tax free benefit.
There will be other momentous changes. Innovation and streamlining of the health care industry is accelerating at an exponential pace as companies, spurred on by competition for the first time, rise to the challenge. We, as the consumers will only benefit, with lower costs for a higher quality product.
The new plan will create 2 million new jobs, and add 0.5% a year to US GDP growth. That assumes that the same number of people are used to provide care that we currently see, or one health care provider for every 15 people.
The great misperception about Obamacare is that it is government provided health care. It has not taken over the hospitals and required doctors to go to work for it, as has been the case in Europe. The government is only facilitating the exchanges, much as it has already done for the stock and commodity exchanges through the SEC and the CFTC, and then paying for the poorest participants.
If you took the name ?Obama? out of Obamacare, you would think that it was a program designed by the Republican Party. Free market capitalism, competition, and open exchanges are supposed to be what they are all about. Obama is only giving them what they have been asking for during the last 30 years, and was already implemented by a Republican governor in Massachusetts, Mitt Romney. Maybe if it were called Obamacare on the coasts, and ?Tea Party Care? or ?Cruz Care? in the Midwest and in Texas it would be less controversial.
Every industrialized country already has national health care. They have been able to limit the growth of health care?s share of their economy to only 8% of GDP, compared to our 12%, but enjoy life spans 5-10 years longer. They had the wisdom to do it when it was cheap in the late 1940?s and early 1950?s.
Unfortunately, the US suffered from fears of a communist takeover then and was undergoing the McCarthy hearings, so there was no chance of adopting socialized medicine. We are supposed to be the smartest people in the world, so we have a better shot at making this work than anyone.
There is a huge investment story here. The health care industry is about to get 30-40 million more customers with government guaranteed payments. This is one of the best free lunches granted to any industry in decades and will be great for business. This is why I have been recommending the Health Care Select SPDR ETF (XLV) since the summer, recently one of the market?s top performing sectors.
Anyone who knows anything about the mathematics of insurance exchanges, such as Lloyds of London, already knows that Obamacare is going to work. Yes, it is possible to insure more people for less cost with the per capita burden carried by a greater number of people. This is why insurance is one of the oldest forms of commerce, originating in London in the mid 17th century, back when they still had to deal with the black plague.
Competition should reign in health care costs. As it matures in a decade or so, Obamacare will become actuarially sound and cost the government nothing. The payoff will be lower overheads and higher profits for US corporations. This is probably what the stock market is trying to tell us by going up almost every day. Since the Obamacare launch on October 1, stock S&P 500 (SPY) has tacked on an astonishing 5.5%, in what is historically a terrible month for stocks.
Obamacare distills down individual policies to plain vanilla securities, which can be traded like stocks, sucking in capital at market prices, much like the derivatives markets do today. You can bet that Wall Street will soon get in on the act as well. They will rapidly introduce hedging strategies, customized securitizations, and even ETF?s, so risks can be laid off here and abroad, creating new profit streams. In a decade the health insurance markets will become unrecognizable and far more efficient than they are today.
I don?t side with either party on this issue. A pox on both their houses. I?m on my side first, then your side, as a paying reader. Hence, this analysis. Overall, the plan is brilliant.
In fact, I wish I had thought of it first.
Bitch all you want about Obamacare, but it?s here to stay. In the meantime, I?m going to make hay why the sun shines, and stay healthy.
Is There a Connection With Obamacare?
More Than Meets the Eye
https://www.madhedgefundtrader.com/wp-content/uploads/2013/10/Obamacare-site.jpg374566Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-31 09:05:342013-10-31 09:05:34My Take on Obamacare
Featured Trade: (WHEN GREAT MINDS THINK ALIKE), (SPY), (HEDGE FUNDS CIRCLING OVER THE EUROPEAN WRECKAGE), (BWX), (IGOV), (ITLY), (EU), (BUND), (FXE), (TESTIMONIAL)
SPDR S&P 500 (SPY)
SPDR Barclays International Treasury Bd (BWX)
iShares International Treasury Bond (IGOV)
PowerShares DB Italian Treas Bond ETN (ITLY)
WisdomTree Euro Debt (EU)
PIMCO Germany Bond Index ETF (BUND)
CurrencyShares Euro Trust (FXE)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-30 08:55:082013-10-30 08:55:08October 30, 2013
Have you ever wanted to spend your summers basking in the sunlight at your mountain top Tuscan villa, surveying the manicured vineyards which produce your own estate bottled wine? Are you drawn by the cachet of claiming George Clooney as a celebrity neighbor on the model strewn shores of Lake Como? How about a luxury apartment that is walking distance from the Vatican?
Hedge fund managers are salivating at the prospect of one of the greatest fire sales in history, as assets of every description were being dumped in the wake of the hard times that hit Europe. On the menu are trillions of dollars of distressed loans hived off by desperately downsizing and deleveraging continental banks. Corporations are expected to dump money losing divisions and subsidiaries in a race to raise cash.
In many respects, these deals of the century represent the second shoe to fall after similar bargains were had in the US during the 2008 crash. Europe?s day of reckoning was postponed by four years, thanks to a recovery in the US, QE1, QE2, QE3, and Federal Reserve policies that kept interest rates at century lows.
The complacency in Europe since then has been staggering, with many turning their noses up, claiming it could never happen there. Some are predicting that the balance sheet scrub could take as long as a decade, similar to Japan?s tortuously long repair of its own banking system.
Some hedge funds are taking advantage of the wholesale withdrawal of European banks from the credit markets to beef up their own international lending?at much higher interest rates. The same funds, like Highbridge, similarly locked in enormous spreads in the US when conditions were dire.
Several American private equity firms are said to be setting up new European distressed asset funds to peddle to pension funds and high net worth individuals. Those who made similar investments in the US four years ago, made fortunes.
For individual investors the easiest and ripest pickings may be among the European bond ETF?s that already trade in the market. Many of these have suffered gut churning declines in recent months as the European melt down unfolded, despite offering yields multiples of what can be found at home.
Below is a short list of continental ETF?s you may want to consider:
PowerShares DB Italian Treasury Bond Fund (ITLY)
Wisdom Tree Euro Debt Fund (EU)
iShares S&P Citigroup International Treasury Bond Fund (IGOV)
SPDR Barclays Capital International Treasury Bond ETF (BWX)
Germany Bond Index (BUND)
Of course, the eternal question of when to buy is the open to debate. There have been enormous declines in European bond yields since the peak. It was a simple shortage of paper, not any ECB intervention that drove yields down so rapidly.
Aggressive traders are already starting to scale in.
The Fat Lady Has Sung for the European Bond Market
Hey, Neighbor!
https://www.madhedgefundtrader.com/wp-content/uploads/2013/10/George-Clooney.jpg393394Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-30 08:51:042013-10-30 08:51:04Hedge Funds Circling Over the European Wreckage
Featured Trade: (MAD DAY TRADER EDUCATIONAL WEBINAR), (THE RUN IN BONDS IS OVER), (TLT), (JNK), (HYG), (MUB), (ELD), (LINE), (AUSTERITY HITS WALL STREET)
iShares 20+ Year Treasury Bond ETF (TLT)
SPDR Barclays High Yield Bond (JNK)
iShares iBoxx $ High Yield Corporate Bd (HYG)
iShares National AMT-Free Muni Bond ETF (MUB)
WisdomTree Emerging Markets Local Debt (ELD)
Linn Energy, LLC (LINE)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-29 01:06:152013-10-29 01:06:15October 29, 2013
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in San Francisco on Friday, November 1, 2013. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $191.
I?ll be arriving at 11:00 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club in downtown San Francisco near Union Square that will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/02/San-Francisco-e1410363065903.jpg238359Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-28 01:04:532013-10-28 01:04:53Last Chance to Attend the November 1 San Francisco Strategy Luncheon
Featured Trade: (FEEL LIKE INVESTING IN A STATE SPONSOR OF TERRORISM?), (GAF), (AFK), (EZA), (WHO SAYS THERE AREN?T ANY JOBS?), (WILL GOLD SUFFER THE FATE OF THE $10,000 BILL?) (GLD), (GDX) (THE TWELVE DAY YEAR)
SPDR S&P Emerging Middle East & Africa (GAF)
Market Vectors Africa Index ETF (AFK)
iShares MSCI South Africa Index (EZA)
SPDR Gold Shares (GLD)
Market Vectors Gold Miners ETF (GDX)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-25 01:07:232013-10-25 01:07:23October 25, 2013
How about buying shares in a country whose leaders have stolen $400 billion in the last decade and have seen 300 foreign workers kidnapped?
Another country lost four wars in the last 40 years. Still interested? How about a country that suffers one of the world's highest AIDs rates, endures regular insurrections where all of the Westerners get massacred, and racked up 5 million dead in a continuous civil war?
Then, Africa is the place for you! Today, it is the world's largest source of gold, diamonds, iridium, chocolate, and cobalt. The countries above are Libya, Nigeria, Egypt, and the Congo. Below the radar of the investment community since the colonial days, the Dark Continent has recently been attracting the attention of large hedge funds and private equity firms.
Goldman Sachs has set up Emerging Capital Partners, which has already invested $2 billion there. China sees the writing on the wall, and has launched a latter day colonization effort, taking a 20% equity stake in South Africa's Standard Bank, the largest on the continent. There are now thought to be over one million Chinese agricultural workers in Africa.
In fact, foreign direct investment in 2010 jumped from $53 billion to $61 billion, while cross border M & A leapt from $10.2 billion to $26.3 billion. The angle here is that all of the terrible headlines above are in the price, that prices are very low, and the perceived risk is much greater than actual risk.
Price earnings multiples are low single digits, cash flows are huge, and returns of capital within two years are not unheard of. These numbers remind me of those found in Japan during the fifties, right after it lost WWII.
The reality is that Africa's 900 million have unlimited demand for almost everything, and there is scant supply, with many firms enjoying local monopolies. The big plays are your classic early emerging market targets, like banking, telecommunications, electric power, and other infrastructure.
For example, in the last decade, the number of telephones has soared from 350,000 to 10 million. It's similar to the early days of investing in China in the seventies, when the adventurous only played when they could double their money in two years, because the risks were so high.
This is definitely not for day traders. If you are willing to give up a lot of short term liquidity for a high long term return, then look at the Market Vectors Africa Index ETF (AFK), which has 29% of its holdings in South Africa and 20% in Nigeria. There is also the SPDR S&P Emerging Middle East & Africa ETF (GAF). For more of a rifle shot, entertain the iShares MSCI South Africa Index Fund (EZA). Don't rush out and buy these today. Instead, wait for emerging markets to come back in vogue, I'll send you a trade alert when this is going to happen.
Meet Your New Partner
https://www.madhedgefundtrader.com/wp-content/uploads/2013/10/African.jpg322512Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-10-25 01:06:442013-10-25 01:06:44Feel Like Investing in a State Sponsor of Terrorism?
Featured Trade: (THE CASE AGAINST TREASURY BONDS), (TBT), (TLT), (MY PERSONAL LEADING ECONMIC INDICATOR), (HMC), (NSANY), (DXJ) (A FILM REVIEW OF ?MARGIN CALL?)
ProShares UltraShort 20+ Year Treasury (TBT)
iShares 20+ Year Treasury Bond ETF (TLT)
Honda Motor Co., Ltd. (HMC)
Nissan Motor Co. Ltd. (NSANY)
WisdomTree Japan Hedged Equity (DXJ)
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